Brazil in July 2010: Up, Up and Away!

Up on the month! Up on the year! Second best month of the year! Cars now selling more than before, even with incentives gone! Wow, our tropical wonderland just gets better and better. Sales are up 15.27 percent on June and 4.27 percent better than the same month last year, for a grand total of 285,299 (according to Brazilian car mag’s Quatro Rodas website). Comparing to the last two months ( here and here), both month-to-month and year-to-year (8.48 percent better) numbers register positively. However, incentives are gone, so naturally sales should be down. Not! Now, I’ve read far and wide on Brazilian internet sites, car rags and whatnot, and nobody has had the guts to explain what’s going on. So I’ll call like it is (or, at least as I see it). There’s a new phenomenon out there. I’m branding it the Uno effect. Not to be modest, but I called it first ( here and here). I want my laurels!

You see my friends, the new Uno is that good. It drives well, gets good economy, and has enough space for luggage and a small family. It has the looks, too. It’s becoming a more and more common sight on our streets. Yet people still break their necks to see the little bugger. Its squared out design stands out quite handsomely in the land of jelly bean shaped compact (or to Americans, sub-compact) hatchbacks. Its interior manages not to offend most people’s sensibilities. In fact, the interior pleases most (remember, we’re talking Brazilian market expectations here) and it has been responsible for winning over more than one buyer that has reservations about ex- and posterior of the car. Fiat has been smart, too. They nailed it on pricing, putting it right in the meat of the market. Somehow, they have also managed to keep dealerships from price-gouging the car to death. It sells for list price. Not one cent less, not one cent more. This has all caused the competition to rip their hair out in despair. What to do?

Discounts! Extra equipment for no extra cost (how does a 4-door car for the list price of a 2-door strike you?)! First payment only due in January 2011! Break the car payment in easy 72 month installments! Just turn on Brazilian TV or read the newspapers and you’ll see all of these “sales tactics” and more. No more talk about quality of their car versus the competition. Just price, price, price. GM, Ford, VeeDub, the French (all purveyors of small cars), they’re all in on the act. The end result is that cars are cheaper to buy now than before, when incentives were in full swing. Heck, for good measure, even the more expensive cars are caving in to the downward trend in prices. This is surely due to the fact that the other makers don’t want to look too bad in rankings and want somehow fight for market share and keep Fiat from pulling too far away.

Don’t feel too badly for the car makers down here though. Your sleuthing reporter has talked to people in the biz. They have told me (after hours of persistent questioning and hounding) that they’re all in a pretty good position to be giving said discounts. You see, since the market meltdown of a few years ago, raw material prices have gone exponentially down. This of course means that car makers have been selling cars at a very hefty profit over the last few years (when prices went up, up, up!). They all pocketed the government’s largesse (and with their pockets full of cash, they warm-heartedly thank the Brazilian taxpayer…as if!) whose incentive programs just gave manufacturers even fatter sales margins and profits. So they have a lot of fat (or margin as it were) to burn. Yours truly wanted a number. Exactly how much less does it cost to produce a car today than, oh let’s say 2 years ago? No one was forthcoming, but thanks to my charm and wit I finally wiggled a suit into giving me a ballpark figure. 30 percent, but don’t tell anyone. Sure.

As to the numbers and breakdown by cars and makers, read below:

Brazil’s Best Selling Cars (thanks to a link from Brazilian car rag’s site, Auto Esporte)

Comments: Uno drawing ever closer to Gol. Sales grew around 20 percent versus Gol’s roughly 13 percent (so Fiat outperformed, while VW’s model underperformed vis-à-vis the general market). If this keeps up, the Uno could give the Gol a run for first place. As to the rest, VW’s Voyage kicked Ford’s Ka out of the top 10. GM’s Celta posted strong numbers, though its cousin, the Corsa Sedan disappointed. I think it’s really a case of GM’s stupidity (or rather, insensitivity) because they dared to increase the price of this car (as everybody was lowering theirs), supposedly because it’s new. Ok, GM don’t you know the market you’re facing? Fiat’s Siena thanked GM”s wisdom and jumped 2 positions. Fiat’s Palio grew this month, too, allaying its parent’s fears that the Uno’s friendly fire would decimate its slightly bigger (and more expensive) brother. However, Fiat wisely marketed it heavily and aggressively lowered pricing and it’s still in the fight with GM’s Celta for 3rd place YTD. In also-ran news, Ford is pouting.

Top 10 Brazilian Car Makers Ranked by Sales and Market Share (thanks to a link from Brazilian car rag’s site, Auto Esporte)

Comments: As to the Big 4, Fiat and VW improve slightly. GM goes down softly. And Ford is tentatively back over 10 percent. Renault improved a healthy full percentage point (backed by improving sales from new Logan and Sandero). The rest fell (except for Peugeot, and yes they were offering something special last month. In their case, they were offering air conditioners in all their cars free of charge). Hyundai seems to have settled in 7th after scaring the market in May. Toyota apparently has lost 7th place definitely. Well, at least for now. Reason? Well they, like GM bucked the market, and their only new product of late, a Corolla 2.0, came with a substantial price increase. Nobody’s buying. Wrong time, wrong market. Toyota, take a leaf from Honda. They seem to be getting it. Yep, even they have been “re-positioning” their prices. Down. For now, not enough. At least if you want market share in this market.

Kudos to us, Brazilian consumers, and kudos to the Uno. It has really shaken the market.

Oh! One last table for your perusing pleasure.

2010 Total Top 10 Car Makers Sales and Market Share (hat tip again to Auto Esporte):

Comments: Total car sales so far in 2010, 1,882,117. This number is 8.48 percent higher than the same period in 2009, which was good for 1,734,973. Sigh of relief from everyone involved as the market is surprisingly better than expected. Even without incentives. Thank the free market!